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Baker Hughes Announces Year End Results

HOUSTON, Feb 13, 2003 /PRNewswire-FirstCall via COMTEX/ -- Baker Hughes
Incorporated (NYSE: BHI; PCX; EBS) announced today that income from continuing
operations in accordance with generally accepted accounting principles (GAAP)
for the year 2002 was $223.7 million or $0.66 per share (diluted) compared to
$418.1 million or $1.24 per share (diluted) for the year 2001. The loss from
continuing operations for the fourth quarter of 2002 was ($2.3) million or
($0.01) per share (diluted) compared to net income of $115.8 million or $0.34
per share (diluted) in the fourth quarter of 2001 and $86.8 million or $0.26 per
share (diluted) in the third quarter of 2002. Net income for the year 2002 was
$168.9 million or $0.50 per share (diluted) compared to $438.0 million or $1.30
per share (diluted) for the year 2001. Net loss for the fourth quarter of 2002
was ($1.5) million or ($0.01) per share (diluted) compared to net income of
$126.0 million or $0.37 per share (diluted) in the fourth quarter of 2001 and
$64.7 million or $0.19 per share (diluted) in the third quarter of 2002.

In December 2002, the company entered into exclusive negotiations for the sale
of its interest in its oil producing operations in West Africa, and received $10
million as a deposit. The sale is subject to the execution of a definitive sale
agreement and is expected to close in the first quarter of 2003. Also, the
company successfully completed the sale of the EIMCO division of the company's
Baker Process segment in November of 2002. Accordingly, the company has
classified and is now reporting both of these operations as discontinued
businesses.

Income from continuing operations excluding the impact of non-operational items
("operating profit") was $309.3 million or $0.92 per share (diluted) for the
year 2002 compared to $472.7 million or $1.40 per share (diluted) for the year
2001. Operating profit for the fourth quarter 2002 was $84.5 million or $0.25
per share (diluted) compared to $86.8 million or $0.26 per share (diluted) in
the third quarter of 2002 and $134.6 million or $0.40 per share (diluted) in the
fourth quarter of 2001. The prior year results have been adjusted to exclude the
impact of goodwill amortization for comparative purposes. The non-operational
item in the fourth quarter was a $90.2 million pre-tax charge ($86.8 million
after-tax or $0.26 per share), which is the company's 30% share of a
restructuring charge announced by Schlumberger Ltd. in December 2002 relating to
the companies' seismic joint venture, WesternGeco. Income from continuing
operations is reconciled to operating profit in the section titled
Reconciliation of GAAP Results and Operating Results in this news release.

Revenue for the year 2002 was $5,020.4 million, compared to $5,139.6 million for
2001. Revenue for the fourth quarter of 2002 was $1,292.1 million, compared to
$1,315.5 million for the fourth quarter of 2001 and $1,280.2 million for the
third quarter of 2002. Oilfield Operations revenue for the year 2002 was
$4,901.5 million, compared to $5,001.9 million for the year 2001. Oilfield
Operations revenue for the fourth quarter of 2002 was $1,262.5 million, down 2%,
compared to $1,287.7 million for the fourth quarter of 2001, and up 1% compared
to $1,251.1 million for the third quarter of 2002.

Mr. Wiley continued, "We expect overall business activity to improve in 2003,
although the timing of a North American recovery and the possibility of military
action in Iraq and its impact remain uncertain. The situation in Venezuela will
certainly have a negative impact on the first part of the year. Regardless of
market conditions in 2003, we will continue to focus on delivering differential
growth at superior margins by entering new growth markets, maintaining our focus
on financial flexibility and discipline, and adding value for our customers
through best-in class technology, performance and reliability."

Financial Flexibility

In September 2002, the Company's Board of Directors authorized the Company to
repurchase up to $275.0 million of its common stock. During the fourth quarter
2002, approximately 500,000 shares were purchased at an average price of $28.76
per share and retired. The company has authorization remaining to purchase from
time to time up to $225.9 million in stock. During the fourth quarter, debt
decreased slightly to $1,547.8 million, and cash increased to $143.9 million.

Operational highlights for the three months and years ended December 31, 2002
and December 31, 2001 and the three months ended September 30, 2002 are detailed
below. All results are unaudited and shown in millions.

Revenue for the fourth quarter of 2002 decreased 2% compared to the fourth
quarter of 2001 and increased 1% compared to the third quarter of 2002.
Sequentially, revenues increased at Baker Atlas, Baker Petrolite and Centrilift.
The sequential improvement at Centrilift was particularly noteworthy, as strong
sales of ESP equipment continue in this relatively high crude oil price
environment.

The pre-tax operating margin was 15.3% for the fourth quarter of 2002 compared
to 15.7% in the third quarter of 2002 as sequential improvements at Hughes
Christensen and Centrilift were offset by modest declines at the other
divisions. The operating margin was 18.6% for the fourth quarter a year ago.
Centrilift showed an improvement in operating profits offset by declines in the
other divisions compared to the fourth quarter a year ago. The operating margin
for the year 2002 was 14.6% compared to 16.9% in 2001.

In February 2003 the company completed the second step of a two part transaction
which resulted in Baker Atlas acquiring certain assets and intellectual property
of the borehole seismic acquisition business of Compagnie Generale Geophysique
("CGG") and the formation of a venture for processing and interpreting borehole
seismic data. Baker Hughes owns 51% of the venture.

Process Operations Segment

Process revenues were $29.6 million in the fourth quarter of 2002, compared to
$27.8 million the fourth quarter of 2001, and $29.1 million in the third quarter
of 2002. Operating profit before tax was lower primarily because of delays on a
large municipal order and manufacturing variances. The sale of the EIMCO
division of Process Operations was completed in November 2002.

Corporate, Net Interest and Other

Corporate, net interest and other expenses were $64.8 million in the December
2002 quarter, up $6.1 million from the December 2001 quarter and up $4.6 million
from the September 2002 quarter. The increase in the December 2002 quarter, as
compared to the December 2001 quarter, was due primarily to decreased interest
income in the fourth quarter of 2002. The increase in the December 2002 quarter,
compared to the September 2002 quarter, was due to increased corporate general
and administrative expenses and foreign exchange losses.

Outlook

The following statements are based on current expectations. These statements are
forward-looking, and actual results may differ materially. Factors affecting
these forward-looking statements are detailed below under Forward-Looking
Statements. These statements do not include the potential impact of any
acquisition, disposition, merger or joint venture that could occur in the
future. Information regarding WesternGeco is based upon information that
WesternGeco has provided to Baker Hughes. Information derived from this
information is subject to the accuracy of the information that WesternGeco
provided. Additionally, any forward-looking statements relating to WesternGeco
are also subject to the factors listed in Forward- Looking Statements in this
news release.

-- Oilfield revenues are expected to be up 4% to 6% for the year 2003 as
compared to the year 2002. Oilfield revenues are expected to be up 1%
to 3% in the first quarter of 2003 compared to the first quarter of
2002 and down 4% to 6% in the first quarter of 2003 compared to the
fourth quarter of 2002.
-- WesternGeco is expected to contribute $15 to $20 million in pre-tax
profit for the year 2003 (compared to $14.6 million in 2002) and $0 to
$3 million in the three months ended March 31, 2003.
-- Process is expected to post a $10 to $15 million pre-tax loss for the
year 2003. Process is expected to lose $4 to $6 million in the first
quarter of 2003.
-- Corporate and other expenses, excluding interest expense, are expected
to be between $150 and $160 million for the year 2003 or approximately
$37 to $42 million per quarter.
-- Net interest expense is expected to be between $100 and $108 million
for the year 2003 or approximately $25 to $27 million per quarter.
-- Income from continuing operations per share (diluted) is expected to
be between $1.00 and $1.10 for the year 2003. Income from continuing
operations per share (diluted) is expected to be between $0.17 and
$0.20 for the three months ended March 31, 2003.
-- Capital spending is expected to be between $330 and $350 million for
the year 2003. Baker Hughes' expectation regarding its level of
capital expenditures is only its forecast regarding this matter. This
forecast may be substantially different from actual results. In
addition to the factors described in Forward-Looking Statements-
General Outlook below, the following factors could affect levels of
capital expenditures: the accuracy of the company's estimates
regarding its spending requirements; the occurrence of any
unanticipated acquisition or research and development opportunities;
changes in the company's strategic direction; and the need to replace
any unanticipated losses in capital assets.
-- Depreciation and amortization expense is expected to be between $330
and $350 million for 2003. Baker Hughes' expectation regarding its
depreciation and amortization expense is only its forecast regarding
this matter. This forecast may be substantially different from actual
results, which could be impacted by an unexpected increase in the
company's assets that are subject to depreciation or amortization or
an unexpected casualty, impairment or other loss in those assets.
-- The tax rate on operating results for the 12 months ended
December 31, 2003 is expected to be approximately 37.0%. Baker
Hughes' expectation regarding its tax rate is only its forecast
regarding this matter. This forecast may be substantially different
from actual results. In addition to the factors described in Forward-
Looking Statements-General Outlook below, the following factors could
affect the tax rate: the level and sources of the profitability of the
company; changes in tax laws or tax rates in the jurisdictions in
which the company operates; and the ability of the company to fully
utilize tax loss carry-forwards and credits in various jurisdictions.

Impact of SFAS 142 on Prior Year Operating Results

The following table is a reconciliation of previously reported operating profit
and earnings per share to the pro forma amounts, which are adjusted for the
exclusion of amortization related to goodwill and goodwill associated with
equity method investments. The table also reflects the impact of classifying
EIMCO and the oil producing property in West Africa as discontinued.

The company has scheduled a conference call to discuss the results of today's
earnings announcement. The call will begin at 8:30 A.M. Eastern time, 7:30 A.M.
Central time. To access the call, which is open to the public, please contact
the conference call operator at 706-643-3468, 20 minutes prior to the scheduled
start time, and ask for the "Baker Hughes Conference Call." A replay will be
available through Thursday, February 20, 2003. The number for the replay is
706-645-9291 and the access code is 7196856. The call and replay will also be
webcast on www.bakerhughes.com/investor .

Forward-Looking Statements

This news release (and oral statements made regarding the subjects of this
release, including on the conference call announced herein) contain forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The words "expect," "expected," "will be," "will," and similar
expressions are intended to identify forward-looking statements.

General Outlook -- Oilfield Segment: Baker Hughes' expectation regarding its
outlook for its oilfield businesses (including, without limitation, the
company's oilfield operations and its minority interest in its production and
refining process equipment venture), changes in profitability and growth in
those businesses and the oil and gas industry are only its forecasts regarding
these matters. These forecasts may be substantially different from actual
results, which are affected by the following factors: the level of petroleum
industry exploration and production expenditures; drilling rig and oil and gas
industry manpower and equipment availability; the company's ability to implement
and effect price increases for its products and services; the company's ability
to control its costs; the availability of sufficient manufacturing capacity and
subcontracting capacity at forecasted costs to meet the company's revenue goals;
the effect of competition, particularly the ability of the company to introduce
new technology on its forecasted schedule and at its forecasted cost; the
ability of the company's competitors to capture market share, the company's
ability to retain or increase its market share; the completion of the company's
proposed West African disposition; world economic conditions; the price of, and
the demand for, crude oil and natural gas; drilling activity; seasonal weather
conditions that affect the demand for energy and severe weather conditions that
affect exploration and production activities; the legislative and regulatory
environment in the United States and other countries in which the company
operates; OPEC policy and the adherence by OPEC nations to their OPEC production
quotas; war or extended period of international conflict, particularly involving
the United States, Middle East or other major petroleum-producing or consuming
regions; acts of war or terrorism; civil unrest or in-country security concerns
where the company operates; the development of technology by Baker Hughes or its
competitors that lowers overall finding and development costs; new laws and
regulations that could have a significant impact on the future operations and
conduct of all businesses as a result of the financial deterioration and
bankruptcies of large U.S. entities; labor-related actions, including strikes,
slowdowns and facility occupations; the condition of the capital and equity
markets in general; adverse foreign exchange fluctuations and adverse changes in
the capital markets in international locations where the company operates; and
the timing of any of the foregoing.

Oilfield Pricing Changes: Baker Hughes expectation's regarding pricing changes
for its products and services are only its expectations regarding pricing.
Actual pricing changes could be substantially different from the company's
expectations, which are affected by many of the factors listed above in "General
Outlook - Oilfield Segment," as well as existing legal and contractual
commitments to which the company is subject.

General Outlook -- Process Segment: Baker Hughes' expectations in this news
release regarding its outlook for its process segment and improvement and growth
in Process' businesses and its markets are only its forecasts regarding these
matters. These forecasts may be substantially different from actual results,
which are affected by the following factors: the effect of competition; the
health of the markets of the company's customers, including, without limitation,
the production and refining, industrial, chemical, municipal wastewater and
mining markets; the level of customer expenditures and investment, especially in
the oil and gas, industrial, chemical, municipal wastewater and mining markets;
the company's ability to control its costs; the ability of the company's
competitors to capture market share; the company's ability to retain or increase
its market share; world economic conditions; the legislative and regulatory
environment in the United States and other countries in which the company
operates; the condition of the capital and equity markets and the timing of any
of the foregoing.

Baker Hughes is a leading provider of drilling, formation evaluation, completion
and production products and services to the worldwide oil and gas industry.